HENRY & BEAVER LLP

By: Christopher J. Coyle

Pa. I.D. No. 30686
By: Amy B. Leonard
Pa. I.D. No. 93526
937 Willow Street
P.O. Box 1140
Lebanon, PA 17042-1140
Tel (717) 274-3644
Fax 717-274-6782
Attorneys for Plaintiff

SALLY A. LINGLE, IN THE COURT OF COMMON PLEAS

Plaintiff OF LEBANON COUNTY,
PENNSYLVANIA

v. CIVIL ACTION-LAW

JOSEPH B. DeANGELO , No. 2008-00839

Defendant JURY TRIAL DEMANDED

PLAINTIFF’S BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT

I. HISTORY OF THE CASE

This is an auto accident case. Plaintiff was a pedestrian in the intersection of 7th

and Cumberland Streets in the City of Lebanon when she was struck and injured by a

car driven by Defendant. Plaintiff filed suit against Defendant, who was insured for

bodily injury liability by Erie Insurance Group. Erie retained counsel to defend the

action.

As the lawsuit progressed, Medicare paid some of Plaintiff’s accident-related

medical bills, and notified Plaintiff that it was asserting a lien in the amount of
$10,597.76 against any recovery Plaintiff might obtain from Defendant. Plaintiff’s

counsel notified Defendant, Erie, and defense counsel of the Medicare lien.

Settlement negotiations followed, and on July 9, 2009, the parties settled

Plaintiff’s claim for $70,000.00. In negotiations leading up to the settlement, the parties

and Erie agreed that Plaintiff and her undersigned counsel would be responsible for

satisfying the Medicare lien. (Motion to Enforce Settlement, Paragraphs 5 and 6,

Exhibit “A”, admitted by Defendant).

Pursuant to the settlement agreement, Erie and Defendant drafted a release that

starts by reciting “[Plaintiff], for and in consideration of the sum of Seventy Thousand

Dollars ($70,000.00), the receipt of which is hereby acknowledged, do hereby . . .

release . . . [Defendant and Erie] . . .” (emphasis supplied). (Motion to Enforce

Settlement, Exhibit “B”, admitted by Defendant). Consistent with the settlement

agreement, and at Defendant’s and Erie’s insistence, the release also contained the

following language (emphasis supplied):

“It is further understood and agreed that [Plaintiff] will indemnify and hold [Erie
and Defendant] harmless from any and all liability, damages, costs, fees and
expenses including, but not limited to medical bills, and expenses arising from
any subrogation, indemnity or other claims/suits made by any person or entity as
a result of any payments made to, or on behalf of [Plaintiff], which arise from and
relate to any injuries, losses or damages incurred by [Plaintiff] due to the above-
described incident. This promise of [Plaintiff] to indemnify, defend and hold [Erie
and Defendant] harmless extends but is not limited to, the claims of all persons,
insurers or entities which have paid . . . Medicare benefits (regardless of whether
said benefits are paid by a privately funded plan or otherwise), or other similar
benefits and are claiming an entitlement to indemnity/reimbursement from
[Plaintiff] under any contract or pursuant to federal or state law or regulation.”

Plaintiff signed the release exactly as drafted by Defendant and Erie,

discontinued the lawsuit, and returned the signed release and a clocked copy of the

Discontinuance to Defendant’s counsel on July 28, 2009. (Motion to Enforce

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Settlement, Paragraphs 8, 9, and Exhibit “C”, all of which are admitted by Defendant).

Rather than send Plaintiff a single check for $70,000.00, Erie sent Plaintiff two checks

totaling $70,000.00, payable as follows:

• “Sally Lingle and Henry & Beaver, LLP Her Attorneys”, $59,402.24

• “Medicare Secondary Payor Recovery Contractor”, $10,597.76 (“the Medicare

check”).

Plaintiff returned the Medicare check to Defendant and demanded that it be

reissued, payable to “Sally Lingle and Henry & Beaver LLP, her Attorneys”. Defendant

and Erie have refused to do so.

On August 21, 2009, Plaintiff filed a Motion to Enforce Settlement pursuant to

Pa.R.C.P. 229.1, asking that Defendant and Erie be ordered to pay $10,597.76, plus

4.25% simple interest from July 31, 2009, to “Sally A. Lingle and Henry & Beaver, LLP.,

her attorneys”, plus attorney’s fees. Defendant and Erie have filed an Answer and an

Amended Answer. On September 8, 2009, Plaintiff filed an Amended Motion to Enforce

Settlement, which simply requested additional relief. By agreement, the parties deem

the Amended Motion denied.

The matter is ready for resolution and listed for October 30, 2009 Argument

Court.1

1
In keeping with the customary practice in Lebanon County, Plaintiff discontinued the action before
receiving any funds from Defendant or Erie. On Plaintiff’s motion, the Court, Tylwalk, P.J., struck off the
discontinuance on August 31, 2009, in order to decide the instant motion.

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 II. QUESTIONS PRESENTED

A. Have the parties entered into an enforceable settlement agreement?

Suggested Answer: Yes

B. Have Defendant and Erie breached the settlement agreement by insisting on

making Medicare a sole, direct, or joint payee on settlement checks?

Suggested Answer: Yes

C. Should Defendant and Erie pay Plaintiff interest and reasonable attorney’s fees
in connection with the filing of this Motion?

Suggested Answer: Yes

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 III. SUMMARY OF PLAINTIFF’S ARGUMENT

There was an enforceable settlement agreement. Defendant offered $70,000.00.

Plaintiff accepted that offer. The parties, as the result of negotiations, agreed that

Plaintiff would satisfy the Medicare lien. Defendant and Erie drafted a release

consistent with the negotiated agreement, and Plaintiff signed it exactly as drafted.

By insisting that Medicare in some manner be named as a payee, Defendant and

Erie have breached the settlement agreement, since they admit that they agreed that

Plaintiff would pay Medicare. Even if it is assumed for argument’s sake that there was

no such agreement, Plaintiff can find no decision, law, regulation, or rule of court that

requires a settling defendant or carrier to name Medicare as a payee, nor can Plaintiff

find any authority for the proposition that a settling defendant or carrier has an

affirmative duty to satisfy a Medicare lien. To the contrary, the law does not so require.

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 IV. ARGUMENT FOR PLAINTIFF

A. There is an enforceable settlement agreement

Settlement agreements are enforced according to principles of contract law. See

Mazella v. Koken, 559 Pa. 216, 224, 739 A.2d 531 (1999); Pulcinello v. Consolidated

Rail Corp., 784 A.2d 122, 124 (Pa.Super., 2001), appeal denied, 568 Pa. 703, 796 A.2d

984 (2002). “There is an offer (the settlement figure), acceptance, and consideration (in

exchange for the plaintiff terminating his lawsuit, the defendant will pay the plaintiff the

agreed upon sum).” Muhammad v. Strassburger, McKenna, Messer, Shilobod and

Gutnick, 526 Pa. 541, 547, 587 A.2d 1346, 1349, cert. denied, 502 U.S. 867, 112 S.Ct.

196, 116 L.Ed.2d 156 (1991). Where a settlement agreement contains all of the

requisites for a valid contract, a court must enforce the terms of the agreement. See

McDonnell v. Ford Motor Co., 434 Pa.Super. 439, 643 A.2d 1102, 1105 (1994), appeal

denied, 539 Pa. 679, 652 A.2d 1324 (1994).

In this case, Defendant offered $70,000.00 to settle the case. Plaintiff accepted

the offer, and provided the required consideration by signing a release of all claims and

discontinuing the suit. An additional negotiated term of the settlement agreement was

that Plaintiff would be responsible for satisfying the Medicare lien. This is demonstrated

by the letter of July 9, 2009, which expressly states that “[Plaintiff] will settle the

Medicare lien and provide you and Erie with proof. Additionally, [Plaintiff] agree[s] to

indemnification / hold harmless language in your release.” (Motion to Enforce

Settlement, Paragraphs 5, 6, Exhibit “A”). Defense counsel drafted a release with such

language, Plaintiff signed it without change, and the action was discontinued.

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 It also bears noting that very first sentence of the release drafted by Defendant’s

counsel clearly contemplates the payment of the entire settlement amount directly to

Plaintiff: “KNOW ALL MEN BY THESE PRESENTS THAT I, Sally Lingle (Releasor), for

and in consideration of the sum of Seventy Thousand Dollars ($70,000.00), the receipt

of which is hereby acknowledged, do hereby remise, release . . .” (Motion to Enforce

Settlement, Exhibit “B”, emphasis supplied).

While Plaintiff does not concede the point, assuming for argument’s sake that the

release is ambiguous, the Court has the authority and responsibility to look outside the

terms of the release itself for other evidence to show both the intent of the parties and

the circumstances surrounding the drafting of the contract. See Harrity v. Medical

College of Pennsylvania Hospital, 439 Pa.Super. 10, 21, 653 A.2d 5, 10 (1994). Such

external evidence would be Plaintiff’s July 9, 2009 letter, Exhibit “A” to the Motion to

Enforce Settlement, as noted above.

B. Defendant and Erie have breached the settlement agreement.

i. Erie and Defendant have no right to involve themselves in the settlement

of the Medicare lien.

Erie and Defendant have breached the settlement agreement because, contrary

to their contractual obligation, they have not paid Plaintiff $70,000.00. They are

resorting to semantics to argue that they have complied with the settlement agreement.

By sending Plaintiff a separate check payable solely to Medicare for the lien amount,

Defendant and Erie, with all the earnestness they can muster, claim that they “. . . are

attempting to have Plaintiff and Plaintiff’s counsel satisfy the Medicare lien by providing

two separate checks.” (Paragraph 13, Amended Answer to Motion to Enforce

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Settlement). Since it is payable solely to Medicare, Erie could have directly mailed the

Medicare check to Medicare from Erie Headquarters. Instead, they have mailed it to

Plaintiff and told her to re-mail it from the Lebanon Post Office! This is a distinction

without a difference. Erie and Defendant are engaging in legal hairsplitting.

When Plaintiff refused to accept a check payable solely to Medicare, Erie and

Defendant offered to issue a check in the lien amount payable to Medicare, Plaintiff, and

Plaintiff’s counsel. (Paragraph 15, Amended Answer to Motion to Enforce Settlement).

Since the Medicare Secondary Payor Contractor is in Detroit, this check would be, as a

practical matter, un-negotiable. This too violates the settlement agreement since,

contrary to the clear terms of the settlement agreement, Defendant and Erie are

attempting to inject themselves into the settlement of the Medicare lien.

ii. The law clearly places the primary duty to satisfy a Medicare lien on
Plaintiff, not Defendant or Erie

Enforcement of Medicare Liens is governed by the Medicare Secondary Payer Act,

42 U.S.C. § 1395y(b)(2), et. seq. (“MSPA”), and relevant provisions of the Code of

Federal Regulations. The MSPA does not require Defendant and Erie to name

Medicare as a payee on settlement checks. They may be required to do so, but only in

certain situations - not applicable to the case at bar - are they mandated to do so. 42

C.F.R 411.24, “Recovery of Conditional Payments”, states in pertinent part (emphasis

supplied):

(h) Reimbursement to Medicare. If the beneficiary or other party receives

a primary payment, the beneficiary or other party must reimburse
Medicare within 60 days.

(i) Special rules.

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 (1) In the case of liability insurance settlements and disputed claims under
employer group health plans, workers' compensation insurance or plan,
and no-fault insurance, the following rule applies: If Medicare is not
reimbursed as required by paragraph (h) of this section, the primary payer
must reimburse Medicare even though it has already reimbursed the
beneficiary or other party.

(2) The provisions of paragraph (i)(1) of this section also apply if a primary
payer makes its payment to an entity other than Medicare when it is, or
should be, aware that Medicare has made a conditional primary payment.”

A “primary payer” is an entity that is required or responsible to make payment

with respect to an item or service under a primary plan. Such entities include insurers,

self-insurers, and third party administrators. 42 C.F.R. § 411.21. Therefore, Erie and

Defendant are “primary payers” and Plaintiff is a “beneficiary.”

Stated simply, the MSPA and relevant regulations require Erie and Defendant to

pay Medicare if, and only if, Plaintiff fails to do so.

Plaintiff can find no Pennsylvania state or federal decisions on this point, but at

least one federal court agrees with Plaintiff’s position. Tomlinson v. Landers, 2009 WL

1117399 (Middle District of Florida, 3:07-cv-1180-J-TEM, April 24, 2009). See

Appendix A. Nevertheless, Pennsylvania courts have dealt with the general subject of

when a lien attaches. A lienholder’s right to subrogation does not accrue until the

injured plaintiff actually receives the compensation from a settlement or verdict. See

Pennsylvania Manufacturers Association Insurance Company v. Wolfe, 626 A.2d 522,

525-26 (Pa. 1993), re-argument denied. A third-party or UIM insurance carrier does not

have any pre-existing fiduciary relationship to a potential lienholder simply by

possessing money or controlling assets to which the lienholder asserts a claim.

Southern Council of Industrial Workers v. Ford, 83 F.3d 966, 968-69 (8th Cir. 1996).

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 The real motive for Defendant’s and Erie’s breach of the settlement agreement

can be found in Paragraph 10 of their original Response to Motion to Enforce

Settlement. Naming Medicare as a payee, they claim, “. . . simply guarantees to

Defendant and Erie that Medicare’s lien will be satisfied rather than Medicare pursuing

Defendant and Erie directly for the Medicare amount which Erie has experienced in

other cases when the Medicare lien has not been satisfied by plaintiff or plaintiff’s

counsel.” No specific cases were cited, and this unverified averment has since been

withdrawn by amendment.

Putting aside the fact that the MSPA and its regulations don’t support Erie, if Erie

can’t trust Plaintiff to satisfy the lien, why should Plaintiff trust Erie to do so? Plaintiff

has agreed to indemnify Erie and Defendant if the lien isn’t paid, but they have made no

such promises to Plaintiff, who is “on the hook” to the same extent if Medicare isn’t paid.

The law expressly places the primary duty to satisfy the lien on Plaintiff, and makes

Defendant and Erie only secondarily liable.

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 iii. By breaching the settlement agreement, Defendant and Erie are
interfering with Plaintiff’s counsel’s right to charge Medicare a fee and costs for
collecting its lien

Plaintiff’s insistence that she be permitted to settle the Medicare lien directly and

without interference from Defendant and Erie is not merely an academic exercise.

Plaintiff’s counsel is entitled by law to charge Medicare a reasonable fee and a pro-rata

share of costs advanced, since his efforts created the fund out of which Medicare will be

reimbursed. Federal regulations require Medicare to reduce the amount of its recovery

“to take account of the cost of procuring the judgment or settlement if: (i)[p]rocurement

costs are incurred because the claim is disputed; and (ii)[t]hose costs are borne by the

party against which [ Medicare] seeks to recover.” 42 C.F.R. § 411.37(a)(1). This

includes reasonable attorneys’ fees and costs advanced. See In re Zyprexa Products

Liability Litigation, 451 F.Supp 2d 458, 478 (E.D. New York, 2006).

Pennsylvania law is in accord. In Pennsylvania Manufacturers Association

Insurance Company v. Wolfe, supra, the Pennsylvania Supreme Court held that an

attorney for an injured employee was entitled to be paid first from a settlement fund

created by his efforts in a suit against a third-party tortfeasor, before the workers’

compensation carrier or the employee received any benefit from third-party settlement.

The court reasoned that the carrier could not expect to receive any settlement money

before the injured employee received such money, and that the employee in turn could

not expect to receive such money without first paying his attorney for creating the

settlement fund, per their fee agreement. 534 Pa. at 74-76, 626 A.2d at 525, 526.

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Although it was a workers’ compensation case, our Supreme Court in Wolfe discussed

general principles of equitable subrogation, and they are applicable to the case at bar.

C. Defendant and Erie should pay Plaintiff interest and reasonable

attorneys’ fees incurred in enforcing the settlement.

Pa.R.C.P. 229.1(g) requires the Court to impose sanctions if there is no material

dispute as to the terms of the settlement or the terms of the release. Sanctions under

the Rule are defined as simple interest at the Wall Street Journal Prime Rate for the first

edition of the applicable calendar year, plus one percent (1%), payable from the twenty-

first day after the release is received by Defendant, together with reasonable attorneys

fees incurred in the preparation of the affidavit2. The Wall Street Journal Prime Rate on

January 2, 2009 was 3.25%.

Plaintiff’s counsel estimates that he will spend at least 4 hours preparing, and

briefing the Motion to Enforce Settlement, as amended. Another estimated one hour

will be required, should there be oral argument. The Court should order Defendant and

Erie to pay simple interest at 4.25% per annum from July 31, 20093 plus attorney’s fees

at an hourly rate of $210.00.

2
Pa.R.C.P. 229.1(e) refers to the filing of an “affidavit” to enforce a settlement. Plaintiff asks the Court to
treat her Motion to Enforce Settlement as such an affidavit.
3
July 31, 2009 being three business days from the date the signed release and Discontinuance were
mailed to defense counsel. Motion to Enforce Settlement, Exhibit “C”

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 V. CONCLUSION

Erie and Defendant have breached a contractual settlement agreement. Plaintiff,

Defendant, and Erie agreed that Plaintiff would directly settle the Medicare lien. Plaintiff

signed a release agreeing to indemnify and hold harmless Defendant and Erie if she

failed to do so. Plaintiff provided Defendant and Erie with a Settlement Distribution

Statement showing exactly how she proposed to reimburse Medicare. The law does

not require Medicare to be named as a payee, but does make Plaintiff – not Defendant

or Erie – primarily responsible for satisfying the Medicare lien.

The Court should grant Plaintiff’s Motion to Enforce Settlement and order

Defendant and Erie to:

(a) Immediately issue a check in the amount of $10,597.76, plus 4.25%

per annum simple interest from July 31, 2009 to the date of payment,

payable to “Sally Lingle and Henry & Beaver, LLP Her Attorneys”;

(b) Pay Plaintiff reasonable attorneys fees based on an hourly rate of

$210.00;

(c) Pay any interest that may be assessed pursuant to 42 C.F.R. §

411.24(h) and 45 C.F.R. § 30.13(d)(1) due to untimely satisfaction of

the Medicare lien (Amended Motion to Enforce Settlement); and

(d) Grant such other relief as the Court may deem appropriate.

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 HENRY & BEAVER LLP

By:__________________________
CHRISTOPHER J. COYLE
I.D. #30686
AMY B. LEONARD
ID #93526
937 Willow Street
P.O. Box 1140
Lebanon, PA 17042-1140
(717) 274-3644
Attorneys for Plaintiff

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 CERTIFICATE OF SERVICE

I, Christopher J. Coyle, of the firm of Henry & Beaver LLP, do hereby certify that

on the date below I served a certified true and correct copy of the within Brief in Support

of Motion to Enforce Settlement upon the following person(s) in the manner specified

below:

Name Manner of Service

Thomas B. Sponaugle, Esquire U.S. 1st Class Mail

Griffith, Strickler, et al.
Attorney for Defendant
110 S. Northern Way
York, PA. 17402-3737

______________________________
CHRISTOPHER J. COYLE

Date: October ____, 2009

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APPENDIX A

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